Table of Contents
Ultra Short Term Bond Funds
Ultra short term funds, earlier referred as Liquid Plus Funds, are funds that invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year(in some cases they may go upto 1.5 years). Ultra Short Term Funds are short term investments that are highly suitable for investors who are willing to marginally increase the risk of investment to earn good returns. Essentially, Ultra short Funds invest in money market securities and other debt instruments of short maturities, however, the average portfolio maturity of these funds is generally little higher than that of Liquid Funds.
Also known as Cash or Treasury Management Funds, Ultra Short Term Funds generally offer good returns that other types of Debt fund (like Liquid Mutual Funds).
Ultra Short Term Bond Funds Features
Fund Type
Ultra-Short Term Funds are open-ended and the maturity period of funds varies from fund to fund. The maturity is very short(usually a couple of months) but longer than that of liquid funds. The investors can easily buy and sell the units of these funds as per the NAV (Net Asset Value) of the redemption day.
NAV of Ultra Short Term Funds
For Ultra Short Term Funds, the purchase happens on a (T+0) basis. This means that the NAV is fixed on the same day as the funds reach the AMC. For e.g. for an investor purchasing the fund within the cut-off time on a Tuesday (and funds being realised), the NAV date applicable would be Tuesday itself.
Exit Load of Ultra Short Term Bond Funds
Some Ultra Short Term Funds may have exit loads on exits made within very short periods of time (ranging from 7 days to 1 month). The period till which exit load applies may vary with funds. However, some ultra short terms funds do not have any exit loads also.
Returns of Ultra Short Term Funds
The returns may be paid to the investors in the form of Dividends (in the case of Dividend Funds) or in terms of appreciation of the fund NAV (in the case of Growth funds).
Redemption Ultra Short Term Funds
In the case of redemption, the process is the same for both liquid funds and Ultra Short Term Funds. For all redemption requests received by the AMC within the cut-off time (3 PM), the proceeds are paid to the customer the next day i.e. on a (T+1) basis. Albeit, if the request gets registered after 3 PM, the investors shall receive the redemption amount day after.
Minimum Amount of Investment
The minimum of Investing in Ultra Short Term Funds is INR 5,000 to 10,000 (on the retail plans).
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Investment Avenues of Ultra Short Mutual Funds
Ultra Short Term Funds are fixed income investments that invest in money market instruments like Treasury Bills but these may be 91-Day, 182-Day or 360-Day Treasury Bills. They can also invest in CDs and CPs having residual maturities longer than 91 days. Moreover, it is sometimes understood that there is no credit risk in such portfolios. However, this is not the case. Any short term investment like Ultra Short Funds can give a negative return as well if there is a default. But, most companies delay payments on longer-dated Bonds before they start defaulting on short term debt (since this would lead a freeze in short term credit). Also, the investors need to carefully look at the portfolio in these funds to assess the quality of instruments and be ready to take that risk.
Why Invest in Best Ultra Short Term Funds?
Typically, the yield on a debt instrument is higher for instruments with longer maturities. Think of it as a way to reward the extra risk that investors take to be invested in the instruments for a longer period of time. In finance, this is called the liquidity premium Theory. Thus, securities in Ultra Short Mutual Funds usually earn a higher yield as compared to Liquid funds (albeit at a relatively higher risk). As a result, Ultra Short Term Funds may give marginally better returns than Liquid funds over comparable periods of time. So, make a sensible short-term investment in Mutual Funds by investing in Best Ultra Short term Mutual Funds to earn good returns with less volatility.
Taxation of Ultra Short Term Funds
In the below table, the returns of Ultra Short Bond Funds received in the form of a dividend are tax-free in the hands of investors.
However, a Dividend Distribution Tax (DDT) is deducted at the source by fund houses, which is 25% in case of Debt Funds like Ultra Short Term Funds.
| Liquid Funds | Liquid Funds | Ultra Short Funds | Ultra Short Funds | |
|---|---|---|---|---|
| Class of Investors | Individuals/HUF | Corporate | Individuals/HUF | Corporate |
| Dividend Distribution Tax | 27.038% | 32.445% | 13. 519% | 32.445% |
| Short Term Capital Gains | As per Income Tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates |
(Please note, investors are advised to consult their Tax consultant before taking any decisions)
Best Performing Ultra Short Debt Funds to Invest FY 19 - 20
Below is the list of top funds have net assets over 100 Crore and managing assets for atleast 3 years.
To provide a combination of regular income and high liquidity by investing primarily in a mix of short term debt and money market instruments. Franklin India Ultra Short Bond Fund - Super Institutional Plan is a Debt - Ultrashort Bond fund was launched on 18 Dec 07. It is a fund with Moderate risk and has given a Below is the key information for Franklin India Ultra Short Bond Fund - Super Institutional Plan Returns up to 1 year are on The primary objective of the schemes is to generate regular income through investments in debt and money market instruments. Income maybe generated through the receipt of coupon payments or the purchase and sale of securities in the underlying portfolio. The schemes will under normal market conditions, invest its net assets in fixed income securities, money market instruments, cash and cash equivalents. Aditya Birla Sun Life Savings Fund is a Debt - Ultrashort Bond fund was launched on 16 Apr 03. It is a fund with Moderately Low risk and has given a Below is the key information for Aditya Birla Sun Life Savings Fund Returns up to 1 year are on (Erstwhile BOI AXA Treasury Advantage Fund) The Scheme seeks to deliver reasonable market related returns with lower risk and higher liquidity through a portfolio of debt and money market instruments.
The Scheme is not providing any assured or guaranteed returns. Further, there is also no assurance that the investment objective of the Scheme will be achieved. BOI AXA Ultra Short Duration Fund is a Debt - Ultrashort Bond fund was launched on 16 Jul 08. It is a fund with Moderately Low risk and has given a Below is the key information for BOI AXA Ultra Short Duration Fund Returns up to 1 year are on Fund NAV Net Assets (Cr) 1 MO (%) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) Franklin India Ultra Short Bond Fund - Super Institutional Plan Growth ₹27.5857
↑ 0.01 ₹19,751 0.7 2.2 4.5 10.1 8.8 9.2 Aditya Birla Sun Life Savings Fund Growth ₹386.697
↑ 0.08 ₹15,421 0.7 2.1 4.4 9.1 7.8 8.4 BOI AXA Ultra Short Duration Fund Growth ₹2,358.41
↑ 0.34 ₹336 0.6 1.9 3.9 8.2 7.8 8.3 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 18 Oct 19 1. Franklin India Ultra Short Bond Fund - Super Institutional Plan
CAGR/Annualized return of 9% since its launch. Return for 2018 was 8.7% , 2017 was 8.2% and 2016 was 9.7% . Franklin India Ultra Short Bond Fund - Super Institutional Plan
Growth Launch Date 18 Dec 07 NAV (18 Oct 19) ₹27.5857 ↑ 0.01 (0.03 %) Net Assets (Cr) ₹19,751 on 31 Aug 19 Category Debt - Ultrashort Bond AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd Rating ☆☆☆☆☆ Risk Moderate Expense Ratio 0.37 Sharpe Ratio 8.9 Information Ratio 3.39 Alpha Ratio 0.14 Min Investment 10,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 9.71% Effective Maturity 7 Months 10 Days Modified Duration 5 Months 19 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 14 ₹10,000 30 Sep 15 ₹10,987 30 Sep 16 ₹12,058 30 Sep 17 ₹13,120 30 Sep 18 ₹14,109 30 Sep 19 ₹15,526 Returns for Franklin India Ultra Short Bond Fund - Super Institutional Plan
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 18 Oct 19 Duration Returns 1 Month 0.7% 3 Month 2.2% 6 Month 4.5% 1 Year 10.1% 3 Year 8.8% 5 Year 9.2% 10 Year 15 Year Since launch 9% Historical performance (Yearly) on absolute basis
Year Returns 2018 8.7% 2017 8.2% 2016 9.7% 2015 9.7% 2014 10% 2013 10% 2012 10.3% 2011 9.4% 2010 5.9% 2009 6.1% Fund Manager information for Franklin India Ultra Short Bond Fund - Super Institutional Plan
Name Since Tenure Santosh Kamath 25 Oct 18 0.85 Yr. Pallab Roy 1 Jun 08 11.26 Yr. Data below for Franklin India Ultra Short Bond Fund - Super Institutional Plan as on 31 Aug 19
Asset Allocation
Asset Class Value Cash 14.88% Debt 75.06% Other 10.06% Debt Sector Allocation
Sector Value Corporate 80.04% Cash Equivalent 8.32% Government 1.58% Credit Quality
Rating Value A 37.96% AA 50.11% AAA 11.93% Top Securities Holdings / Portfolio
Name Holding Value Quantity Call, Cash & Other Assets
Receivables | -10% ₹1,986 Cr Vedanta Limited
Debentures | -4% ₹787 Cr 7,900 Vodafone Mobile Services Limited
Debentures | -4% ₹755 Cr 7,990 DOLVI Minerals & Metals Private Limited
Debentures | -4% ₹701 Cr 3,910 Renew Power Ventures Private Limited
Debentures | -3% ₹675 Cr 6,740 JM FINANCIAL CREDIT SOLUTIONS LIMITED
Debentures | -3% ₹540 Cr 5,400 REC LIMITED
Commercial Paper | -2% ₹463 Cr 9,500 Indostar Capital Finance Limited
Debentures | -2% ₹441 Cr 4,400 INDOSTAR CAPITAL FINANCE LIMITED
Debentures | -2% ₹391 Cr 3,900
↑ 3,900 EDELWEISS COMMODITIES SERVICES LIMITED
Debentures | -2% ₹373 Cr 7,500 2. Aditya Birla Sun Life Savings Fund
CAGR/Annualized return of 7.8% since its launch. Ranked 6 in Ultrashort Bond category. Return for 2018 was 7.6% , 2017 was 7.2% and 2016 was 9.2% . Aditya Birla Sun Life Savings Fund
Growth Launch Date 16 Apr 03 NAV (18 Oct 19) ₹386.697 ↑ 0.08 (0.02 %) Net Assets (Cr) ₹15,421 on 31 Aug 19 Category Debt - Ultrashort Bond AMC Birla Sun Life Asset Management Co Ltd Rating ☆☆☆☆☆ Risk Moderately Low Expense Ratio 0.35 Sharpe Ratio 9.3 Information Ratio 0.32 Alpha Ratio 3.1 Min Investment 1,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 6.71% Effective Maturity 5 Months 26 Days Modified Duration 5 Months 12 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 14 ₹10,000 30 Sep 15 ₹10,932 30 Sep 16 ₹11,944 30 Sep 17 ₹12,869 30 Sep 18 ₹13,716 30 Sep 19 ₹14,963 Returns for Aditya Birla Sun Life Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 18 Oct 19 Duration Returns 1 Month 0.7% 3 Month 2.1% 6 Month 4.4% 1 Year 9.1% 3 Year 7.8% 5 Year 8.4% 10 Year 15 Year Since launch 7.8% Historical performance (Yearly) on absolute basis
Year Returns 2018 7.6% 2017 7.2% 2016 9.2% 2015 8.9% 2014 9.7% 2013 9.5% 2012 9.7% 2011 9.2% 2010 5.8% 2009 5.8% Fund Manager information for Aditya Birla Sun Life Savings Fund
Name Since Tenure Sunaina Cunha 11 Oct 14 4.89 Yr. Kaustubh Gupta 15 Jul 11 8.14 Yr. Data below for Aditya Birla Sun Life Savings Fund as on 31 Aug 19
Asset Allocation
Asset Class Value Cash 46.48% Debt 53.52% Debt Sector Allocation
Sector Value Corporate 55.51% Government 24.08% Cash Equivalent 19.61% Securitized 0.8% Credit Quality
Rating Value AA 15.57% AAA 84.43% Top Securities Holdings / Portfolio
Name Holding Value Quantity National Bank For Agriculture And Rural Development
Debentures | -3% ₹539 Cr 5,350
↑ 5,350 Power Finance Corporation Ltd.
Debentures | -3% ₹467 Cr 4,650 AXIS BANK LIMITED
Certificate of Deposit | -3% ₹443 Cr 45,000
↑ 10,000 Rural Electrification Corporation Limited
Debentures | -3% ₹429 Cr 4,263 Bharti Telecom Limited
Debentures | -3% ₹395 Cr 3,500 LIC Housing Finance Limited
Debentures | -2% ₹322 Cr 3,200
↑ 750 POWER FINANCE CORPORATION LIMITED
Debentures | -2% ₹308 Cr 3,050 Power Finance Corporation Ltd.
Debentures | -2% ₹294 Cr 2,900 6.35% Govt Stock 2020
Sovereign Bonds | -2% ₹291 Cr 29,000,000
↑ 29,000,000 Clearing Corporation Of India Limited
CBLO | -2% ₹274 Cr 3. BOI AXA Ultra Short Duration Fund
CAGR/Annualized return of 7.9% since its launch. Ranked 9 in Ultrashort Bond category. Return for 2018 was 7.6% , 2017 was 8% and 2016 was 9.1% . BOI AXA Ultra Short Duration Fund
Growth Launch Date 16 Jul 08 NAV (18 Oct 19) ₹2,358.41 ↑ 0.34 (0.01 %) Net Assets (Cr) ₹336 on 31 Aug 19 Category Debt - Ultrashort Bond AMC BOI AXA Investment Mngrs Private Ltd Rating ☆☆☆☆ Risk Moderately Low Expense Ratio 0.65 Sharpe Ratio 8.92 Information Ratio 2.08 Alpha Ratio 0.34 Min Investment 5,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 6.28% Effective Maturity 5 Years 5 Months 19 Days Modified Duration 5 Months 1 Day Growth of 10,000 investment over the years.
Date Value 30 Sep 14 ₹10,000 30 Sep 15 ₹10,918 30 Sep 16 ₹11,907 30 Sep 17 ₹12,900 30 Sep 18 ₹13,805 30 Sep 19 ₹14,934 Returns for BOI AXA Ultra Short Duration Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 18 Oct 19 Duration Returns 1 Month 0.6% 3 Month 1.9% 6 Month 3.9% 1 Year 8.2% 3 Year 7.8% 5 Year 8.3% 10 Year 15 Year Since launch 7.9% Historical performance (Yearly) on absolute basis
Year Returns 2018 7.6% 2017 8% 2016 9.1% 2015 8.7% 2014 9.3% 2013 9.2% 2012 8.5% 2011 8.2% 2010 5% 2009 4.7% Fund Manager information for BOI AXA Ultra Short Duration Fund
Name Since Tenure Nitish Gupta 5 Dec 18 0.57 Yr. Amit Modani 5 Dec 18 0.57 Yr. Data below for BOI AXA Ultra Short Duration Fund as on 31 Aug 19
Asset Allocation
Asset Class Value Cash 71.63% Debt 28.37% Debt Sector Allocation
Sector Value Cash Equivalent 48.51% Corporate 35.66% Government 15.83% Credit Quality
Rating Value A 8.22% AAA 91.78% Top Securities Holdings / Portfolio
Name Holding Value Quantity Avendus Finance Private Limited
Debentures | -9% ₹26 Cr 2,600,000 MAHINDRA & MAHINDRA FINANCIAL SERVICES LIMITED
Debentures | -8% ₹25 Cr 2,500,000
↑ 2,500,000 NATIONAL HOUSING BANK
Debentures | -8% ₹25 Cr 2,500,000 INDUSIND BANK LIMITED
Certificate of Deposit | -8% ₹25 Cr 2,500,000 SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA
Certificate of Deposit | -8% ₹24 Cr 2,500,000 ICICI Bank Limited
Certificate of Deposit | -8% ₹24 Cr 2,500,000
↑ 2,500,000 HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
Commercial Paper | -8% ₹24 Cr 2,500,000 Bank Of Baroda
Certificate of Deposit | -8% ₹24 Cr 2,500,000 Export-Import Bank Of India
Certificate of Deposit | -8% ₹24 Cr 2,500,000 INDIAN BANK
Certificate of Deposit | -8% ₹24 Cr 2,500,000
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